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October 23, 2013

Schorsch’s American Realty to Buy Rival Cole REIT

The deal comes on the heels of purchases of First Allied and Investors Capital

After gobbling up two broker-dealers and an alternative investment firm, investor Nicholas Schorsch is at it again.

American Realty Capital (ARCP), which he leads, said Wednesday that it was buying rival Cole Real Estate Investments in a deal worth $11.2 billion.

“As a result, American Realty Capital Properties will become the largest net lease REIT and the new industry leader,” said Chairman & CEO Schorsch, in a press release. “We benefit by uniting not only two exceptional real estate portfolios, but also by joining forces with Cole’s world-class management team.”

The combined firm will focus on net-lease REITs. It will have some 3,730 properties nationwide — about half of which are leased by investment-grade tenants, according to ARCP.

“By leveraging our successful track records, our complementary businesses and highly skilled professionals, we are confident that we will be well-positioned to achieve continued growth,” Schorsch said. “This merger represents a new beginning for former competitors, and we look forward to uniting two of the industry’s most talented organizations.”

In early October, RCS Capital Corp., also led by Schorsch, filed preliminary paperwork to purchase the independent broker-dealer Investors Capital Corp. It also said it was buying the liquid alternative investment firm Hatteras Funds.

At the time, Chip Roame of Tiburon Strategic Advisors said the moves reminded him of the playbook followed by AIG and Advanced Equities as part of their respective growth strategies. "AIG rolled up IBDs, and Advanced Equities bought IBDs and sought specifically to distribute alternative products," the consultant explained said in an interview.

In other words, "Larry Roth's move … is making more sense every day," he said.

In mid-June, RCAP Holdings — the parent firm of RCS Capital — shared plans to buy independent broker-dealer First Allied Securities from its private-equity owner, Lovell Minnick Partners, which had owned a majority stake in the IBD for less than two years.

In an interview with Bloomberg, Schorsch said American Realty may be done hunting large deals, at least until the Cole deal closes.

“Cole was not just the next conquest,” he told the news service. “Cole was a very strategic, transformational deal that we have to digest. We have to take a very deliberate approach, take a break, finish these transactions, and then see what comes next.”